The 25% tariffs imposed by the US could present an unexpected opportunity for Indian auto parts manufacturers
The 25% tariffs on automobiles, set to take effect on April 3, and the tariffs on auto parts, scheduled for May 3, 2025, may have minimal negative impact on India’s auto parts exports. While the tariffs on cars, accounting for around $10 million in Indian exports, are insignificant, the situation is different for auto parts, where India exports $2.2 billion to the US, nearly 30% of its total automobile component exports, reported timesofindia.indiatimes.com.
The 25% tariff could be an opportunity for India’s auto parts industry rather than a setback
Despite the potential risks, India’s auto parts manufacturers are unlikely to face severe competitive disadvantages from the tariffs.
The tariff is applied uniformly, which means all countries are equally affected, and the competitive advantage of Indian manufacturers remains intact.
However, some companies are already working on cost reduction strategies to maintain profitability amidst this new challenge.
Furthermore, US manufacturers, while benefiting from the tariff shield, are unlikely to outprice Indian manufacturers due to the substantial labor cost advantages in countries like India, Vietnam, and China.
Despite the tariff, the labor cost advantage in India remains a key factor, making it difficult for US manufacturers to match Indian prices.
Even with a 25% tariff in place, India’s auto parts industry has a substantial edge in labor costs, with Indian workers being paid a fraction of their US counterparts. The wage disparity of 10:1, alongside differences in productivity and automation levels, makes it challenging for US manufacturers to compete on price.
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